October 5th Morning Update

The US$ is higher, oil is up, equity markets higher US yields are up. Debt ceiling remains top issue with Biden accusing Republicans of stonewalling. Raising the debt limit comes down to paying what we already owe … not anything new,” In other news, U.S. Secretary of State Blinken is in Paris to repair damage caused by the Australian cancellation of French subsequent purchase of US submarines. Japan’s Kishida affirms US alliance amid concern over China. OPEC+ sticks to plan for gradual oil output hike saying that 4th quarter demands are usually lower and that they are concerned about a COVID 4th wave. COVID, Russia’s COVID death hits new one day record. AstraZeneca seeks U.S. authorization of drug to prevent COVID-19. NY’s largest healthcare provider fires 1,400 workers over vaccination. Former FDA chief expect Delta to be the last big pandemic wave in the US. In currency markets, for the 4th consecutive day China entered Taiwan air defense zone, this time with a record number of planes (56). The RBA left the official Australian cash rate unchanged. RBA Governor Lowe reiterated that interest rates will remain the same until the inflation rises sustainably within the 2-3% target range.

The Loonie gained traction despite mixed economic data. The Canada Building Permits declined 1.2% in August. A pull back in WTI prices limits the gain for the Canadian dollar. Markets are waiting for the Canada International Merchandise Trade, US ISM Service PMI later this morning. Support remains at 1.2575, while resistance holds at 1.2670.

EUR/USD reverses part of recent gains and returns to 1.1600. German Manufacturing PMI came at 56.2 (from 60.8) and the EMU’s gauge receded to 56.4. Still in the euro area, Producer Prices rose 1.1% MoM in August and 13.4% over the last twelve months. Later in the session, Lagarde will speak in Frankfurt. Support resets to 1.1565, while resistance holds at 1.1675.

After a quick breakout last week of .8600, the EURGBP is now testing the mid-August lows. Support holds at .8500 (1.1765) while resistance resets to .8600 (1.1628).

The EU-UK clash over the Northern Irish protocol and ongoing petrol shortages are pushing the pound down. UK Services PMI for September was revised higher to 55.4 from the 54.6 flash reading. GBP/USD attracted dip-buying and turned positive for the fourth successive day. ISM Services PMI is key to further gains. Support holds at 1.3550 and while resistance resets at 1.3640.